The Federal Reserve (Fed), on April 30, announced it was expanding the scope and eligibility of the Main Street Lending Facility (MSLF) program—providing new term sheets, changing program eligibility and adding a third facility. The MSLF was established by the Fed to support small- and medium-sized businesses through the COVID-19 crisis.
As previously reported, NMHC submitted comments to the FED offering suggestions on how best to maximize the effectiveness of the MSLF for the multifamily industry. Our comments addressed:
- Ensuring MSNLF and MSELF conforms to the Intent of the Coronavirus Aid, Relief, and Economic Security (CARES) Act;
- loan underwriting;
- loan parameters;
- and loan use.
In addition, we urged the Treasury and Board of Governors to consider providing loan forgiveness similar to the forgiveness offered by the SBA Paycheck Protection Program (PPP).
However, in a discouraging turn of events, it appears that real estate may be ineligible to participate in the newly created MSLF. Like the Small Business Paycheck Protection Program (PPP), the FED uses the same ineligible business lists that excludes multifamily developers and owners who use third party managers to manage their properties in outlining the terms of the program.
In the accompanying FAQ, further confusion is cast on eligibility because the Fed acknowledges that loan sizing using EBITDA is not appropriate for asset-based borrowers, which multifamily certainly falls under. EBITDA is the key underwriting metric required for the MSNLF, MSPLF and MSELF. The Federal Reserve recognizes that the credit risk of asset-based borrowers, as a matter of practice, is generally not evaluated on the basis of EBITDA. The Federal Reserve and the Treasury Department will be evaluating the feasibility of adjusting the loan eligibility metrics of the Program for such borrowers.
NMHC, NAA and other real estate trade groups will continue to push for the multifamily industry to be fully included as eligible for both the PPP program and the new Main Street Lending Programs and are crafting comments for submission on this new set of proposed program guidelines.
These programs are described in detail on the Fed’s website:
- Click here for details on the MSNLF
- Click here for details on the MSELF
- Click here for details on the MSPLF
- View the Federal Reserve FAQ here
For more information on NMHC’s advocacy work during the coronavirus outbreak, please visit the NMHC COVID-19 Hub.
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